Before NAFTA, automotive trade in Canada and the United States was governed first by the Auto Pact of 1965, and then the Canada-US FTA of 1988. Mexico was a minor player and Canada was the low-cost option for manufacturing in a North American auto industry that was restricted to the U.S. and Canada. We did well, earning more than our fair share of automotive investment and jobs.
However, when NAFTA was put in place in 1994, Mexico became the low-cost alternative for making vehicles. For Canada’s automotive manufacturing industry, the intervening years have been marked by long, slow decline.
Some context: Since 2000, Canada has seen seven final-assembly auto plants close. In 2019, Canada made fewer vehicles than Canadians purchased, the first time that has happened since 1964. This year, Canadians will make about half as many vehicles as they did in 2000. During the same period, Mexico vehicle production has jumped to four million from 1.9 million.
It was against that backdrop that the Detroit Three (GM, Ford and FCA) and Unifor entered their tri-annual labour negotiations in Canada this fall. For many, expectations were low. However, by the time the parties had concluded those talks, the Detroit Three had announced $4.9-billion in reinvestments in their Canadian operations. GM, for example, committed to reopen an assembly plant in Oshawa in 2022 to make pick-up trucks and Ford laid out plans to make electric vehicles in Oakville, Ont., in 2026.
Good news for a sector where good news has been in short supply.
Indeed, many have positioned the Detroit Three’s announcements as emblematic of Canada’s automotive industry turning the corner. Many people have taken their bows: Policy makers in Queen’s Park and Ottawa have pointed to their smart and timely (and hefty) incentives. Unifor has suggested that their continuing pressure and effective negotiations were integral. Anyone associated with the Canada-United States-Mexico Agreement – the new NAFTA – have declared that its introduction of a requirement for minimum levels of higher-cost labour in each vehicle was key.
Not so fast.
First, pick-up trucks sales are growing fast, and GM needs truck capacity now. Retooling Oshawa and rehiring its already-trained workers is much easier and a lot faster than building a new plant and hiring and training new workers in Mexico or Alabama (or Michigan). In short, GM is not opening a new plant, merely reopening something they never should have closed in the first place. (And because it was the last to close and the first to reopen, its long-term viability should be considered shaky.)
Second, making battery-electric vehicles (BEVs) like the ones Ford will make in Oakville is relatively straightforward. Indeed, a BEV drivetrain contains about one-sixth the number of parts of an internal combustion engine (ICE) and its assembly requires 30 per cent less time (and people). For perspective, in 2012, it only took Toyota in Woodstock, Ont., a few months to get ready to build a BEV RAV4 with Tesla.
Third, Ford’s decision to build BEVs in Oakville has been portrayed as an outcome of contract negotiations with Unifor. But here’s the thing: Ford does not plan to start building electric vehicles in Oakville until 2026. In the meantime, Ford and Unifor will bargain another contract in 2023. Let’s hope that Oakville’s workers are not subject to another round of bargaining on the basis of their plant’s “precarious” future in 2023.
Fourth, GM did not make trucks in Oshawa and Ford did not promise to make electric vehicles in Oakville because Unifor or any government in Canada asked. That’s not how automotive executives make decisions. It is far more likely that GM’s or Ford’s negotiations with Unifor, or Ontario and Ottawa, happened after – after – the decision to make trucks in Oshawa or electric vehicles in Oakville was made by GM and Ford in Detroit. The direction from headquarters would have been, “okay, we’re prepared to make these investments. Now go and see what you can get from government or somehow use this to negotiate with Unifor.”
In the end, the Ontario-Ottawa-Unifor narrative is convenient. They might even believe it. Meanwhile, it is in the best interest of the automakers to go along with it, too. After all, to disagree is to say to government “your money didn’t matter.” That means, the GM, Ford and Fiat Chrysler investments are not a consequence of government intervention. They are not an outcome of heroic labour negotiations. They are not a harbinger of Canada’s reindustrialization. They will not vault Canada to the upper reaches of carbon-free mobility. They are the outcome of conditions and circumstances affecting GM, Ford and FCA. That’s all. They are helpful and we should be happy to have them, but let’s not convince ourselves that Canada’s automotive manufacturing industry has turned a corner.
Greig Mordue is the ArcelorMittal Dofasco chair in advanced manufacturing policy in the faculty of engineering at McMaster University
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